Ladies and gentlemen thank you for standing by and welcome to the INTL FCStone Q4 Fiscal Year 2019 Earnings Call. At this time, all participant lines are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the call over to Bill Dunaway. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for the fiscal fourth quarter ended September 30, 2019. After the market closed yesterday, we issued a press release reporting our earnings for the fourth fiscal quarter of 2019. This release is available on our website at www.intlfcstone.com, as well as a slide presentation which we will refer to on this call and our discussions of our quarterly and year-to-date results. You'll need to sign on to the live webcast in order to view the presentation. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto as well as the Form 10-K filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the Company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there could be no assurances that the Company's actual results will not differ materially from any results expressed or implied by the Company's forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Participants are cautioned that any forward-looking statements are not guarantees of future performance. With that, I'll now turn the call over to Sean O'Connor, the Company's CEO.

Thanks Bill, good morning everyone, and thanks for joining our fiscal 2019 yearend earnings call. Market conditions were modestly favorable in certain areas such as grains due to weather events in the U.S. and fixed income particularly for our mortgage business but was subdued in other areas. In addition we saw a more accommodative stomps from the Fed with three interest rate cuts, two of which happened during the quarter under review and one shortly after. Interest rates obviously affect the return we get on our customer floats but it's important to note that growth in the underlying customer assets tempers the impact of the lower interest rates which Bill will highlight later in his section. We had a record Q4 by almost every measure from operating earnings through to EPS. Although net earnings were boosted by bad debt insurance recovery on the 2017 coal matter. Our operating revenues were up 18% versus a year-ago and up slightly sequentially versus the immediately prior Q3. Net income was up 73% versus a year ago and diluted EPS was a $1.40 also up 73% resulting in a quarterly ROE of 18.7%. During the fiscal 2019 with several one-off items and when netted out had a positive impact of 7.6 million on our pretax quarterly earnings. Segment net income was up a strong 43% from a year ago and up 27% if the insurance recovery is excluded. All of our segments showed strong growth with the exception of global payments which was down slightly due to a reduced number of larger corporate cross-border payments related to M&A activity due to global uncertainty as well as the impact of the acquisition of PayCommerce our swift service hosting business. Our largest segment commercial hedging showed strong growth of 20% in segment income due to a…

Thank you Sean. I will be referring to slides and the information we have been made available as part of the webcast. Specifically starting with slide number three which shows our performance over the last five fiscal quarters which I expects our net income, earnings per share, and ROE over the last five quarters. As shown net income in the fourth quarter of 2019 was 27.2 million which represents a $10.9 million increase over the immediately preceding quarter and $11.5 million increase over the prior year. Earnings per share were a $1.40 in the fourth quarter as compared to $0.84 and $0.81 per share in the immediately preceding and prior-year quarters respectively. Moving onto slide number four which represents a bridge between operating revenues for the fourth quarter of last year to the current period. Operating revenues were 286.9 million in the current period up 43.7 million or 18% over the prior year. This growth was led by our securities segment which added 31.7 million or 66% in operating revenues versus the prior year. In this segment equity capital markets added 12.4 million in operating revenues versus prior year primarily as a result of a $7.8 million increase in conduit securities lending revenues as well as a 13% increase in the dollar volume traded. Debt capital markets also had a strong quarter adding 17.9 million in operating revenues versus the prior year primarily driven by increased activity in our domestic fixed income business, improved performance in Argentina, and the acquisition of GMP Securities. Operating revenues increased in our commercial hedging segment by 6.6 million versus the prior year to 75.6 million. Exchange rate volumes increased 9% driven by weather-related volatility in the domestic grain markets while OTC volumes increased 11% as a result of the growth in both North and…

Thanks Bill. As most of our shareholders know our financial NorthStar has been to compound our shareholder capital to become a bigger and more valuable business. This is why we have set ROE as our primary financial target which has also been embedded in our executive compensation plan as well as compensation for senior management generally. This approach enables us to create our own capital runway to support our growing franchise and as a result we are less dependent on the capital markets and cannot be flexible and opportunistic in approaching them. In short we will only take on capital when it is available and price right from our perspective. We also believe that by this ROE metric we've finally outperformed our peer group companies and most of the bulge bracket banks which is validation of empirically of our strategy and approach. Our book value now stands at $31.15 versus $24 two years ago, an increase of 30%, the result of us achieving our 15% target over the last two years. Our business model offers vertically integrated execution and clearing in all major asset classes and markets for our clients. This is a unique and increasingly valuable platform in the mid-market space because it allows clients to efficiently access many markets and asset classes through one provider which is generally only available with the bulge bracket banks. This has drawn clients to our platform and as consolidation continues and it will enable us to create sticky client relationships and increase clearing and execution revenues while also growing our client balances. Management's priority is to remain intently focused on our goal of becoming best-in-class financial franchise by relentlessly pursuing the following objectives; increasing the value of our financial platform by adding new products, capabilities, and markets and liquidity venues for our…

[Operator Instructions]. Our first question comes from Bill Dezellem of Tieton Capital. Your line is open.

Thank you. That's Tieton Capital. A couple of questions, first of all relative to your variable expense target 50% and that you've been running for some time closer to 60%, is it time to change your target or over time would you expect that 50% to really be a better number?

Hey Bill, it's Sean. Thanks for joining. So part of variable costs is exchange fees because when you execute trades we have to pay some fee to the exchanges and that's obviously variable. So to a certain extent that percentage and that target is influenced by our business mix. How many of our transactions go to exchanges and also is related to the increase in those fees and also the margin on the underlying transactions. So there's kind of a complex interplay. Fees are becoming an increasingly larger proportion of what we trade. So that's why I think the number is higher. I don’t think we need to change it because I suspect we will see some of those metrics going the other way at some points. But I think that's the reason we have been above that percentage. Bill, would you agree with that or…

No, I agree and I think that we established those targets right within and I think improved historically that we hit those targets that we've set that we reach our ultimate target which is 15% ROE and product mix will provide some variability in a few of those targets over time. But I think the long-term performance shows that if we hit those targets we are successful.

Thank you both.

[Operator Instructions]. There are no further questions I would like to turn the call -- actually we do have a question from Eric San [ph] of Private Capital Management. Your line is open.

Good morning guys. I have a quick question. How are you? I have a quick question with regards to the incremental capital invested in new initiatives this year or maybe in the last 24 months, have you guys quantified in terms of how much incremental capital, have you guys deployed both on the new initiatives in terms of like organically generating new business and also investing and buying new platforms?

Well, let me try and answer the question generically and Bill will correct me if my numbers are wrong, how about that. So I would say during the last year our estimate is that the discrete initiatives we've mentioned on this call have cost us in terms of P&L over $10 million. So we've invested $10 million of our earnings in new initiatives, some of these have been we've acquired initiatives that are loss-making and we've got a -- we've got to bear some losses and take out some retention cost to turn them around. And that's net of kind of the bargain purchase gains that we got. So in aggregate the losses were more like 15 million and offset by a $5 million guidance. That's the amount of P&L impact. In terms of underlying capital that is committed to those businesses almost all of those activities are very light Capital users. So we've been able to absorb those activities without any meaningful addition to capital to support them. Most of them have been straight execution businesses. The capital to support those is really kind of show capital which we have. So those are -- when we turn those businesses around and they are all on track to turnaround those businesses should be very accretive to row as a result but we have to kind of bear the cost of the sort of $10 million. The one exception to that which is yet to be reported is the acquisition of UOB which we've spoken about for a while. That business actually closed, just off the year-end, I think it was 1st October the actual close date. That was a meaningful bold of expenses now we will get the offset of revenues which is why that deal was so interesting to…

Yeah yes, it does answer the question. I mean I guess you suspect I'm going basically towards understanding the incremental earnings over the next few years from these initiatives basically. But I guess I can actually derived the conclusion out of what you said yes?

Okay, any other questions operator.

[Operator Instructions]. There are no questions. I would like to turn the call back over to Sean O'Connor for any closing remarks.

Okay, well thank you all. Let me finish up by thanking all of our 2000-plus professionals around the world for their unwavering commitment and hard work over the years. I would also like to thank my exceptional management team who I think are the best in the business for their dedication, hard work, and relentless execution. This is really an exciting time for us, it is the beginning of I guess a new decade. We've got big plans for the future and we think great things lie ahead. So all that's left to say for me is happy holidays to everyone. Enjoy the family time and we will see you in 2020. Thank you.

Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.